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I'll bet I'm not the only one struggling with this one.

I retired in 2000 at age 55. Let's just say my portfolio was more than adequate to meet my income needs in the long term at 4% withdrawal rate. Almost immediately my portfolio got hit by the tech meltdown and then 9/11. Still plenty to cover my needs, although I did reduce my travel about 20% until the market recovered just as a precaution. Including automobile purchases I withdrew close to 5% on average until this year. Now I'm on SS and reduced my withdrawals to less than 3% of my 12/31/07 balance for normal expenses and 3.5% if I included a provision for automobile purchases periodically.

So I was feeling pretty good going into 2008. Still not feeling too bad through the 3rd week of Sept. My portfolio was down, of course, but less than half the loss in the broad equity market indexes. Well, the next 3 weeks doubled my losses for the year as every asset class except cash got clobbered by the total lack of confidence in the world financial system.

So now I'm 63 and looking at a portfolio worth about 70% of it's value when I retired. And I'm wondering if I need to reapply the 4% rule from scratch. Doing that would cover my normal expenses but leave nothing extra for large purchases like autos. Sticking with 4% of my portfolio in 2000 adjusted for inflation would allow withdrawals of much more than I need. Using 4% of the 12/31/07 value would cover normal expenses plus occasional large purchases like an auto.

I've been investing for 35 years but I've never seen anything like the financial confidence collapse this year. My gut tells me we'll recover at least to 2007 levels sooner than many pundits think. OTOH, I don't want to put myself in a position of having to find a job at 85 just to survive. Frankly I don't want to have to find a job now either. I'm enjoying retirement too much. Just wondering what others are doing with their withdrawals now.
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